Question
Consider the following 6 months of returns for 2 stocks and a portfolio of those 2 stocks: Jan (%) Feb (%) Mar (%) Apr (%)
Consider the following 6 months of returns for 2 stocks and a portfolio of those 2 stocks:
Jan (%) Feb (%) Mar (%) Apr (%) May (%) Jun (%) Stock A 2 5 -6 3 -2 4 Stock B 0 -3 8 -1 4 -2 Portfolio 1 1 1 1 1 1
Note: The portfolio is composed of 50% of Stock A and 50% of Stock B.
a. What is the expected return and standard deviation of returns for each of the two stocks?
b. What is the expected return and standard deviation of returns for the portfolio?
c. Is the portfolio more or less risky than the two stocks? Why?
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Public Finance In Canada
Authors: Harvey Rosen, Beverly George Dahlby, Roger Smith, Jean-Francois Wen, Tracy Snoddon
3rd Canadian Edition
0070951659, 978-0070951655
